Harrisburg Files for Bankruptcy on Overdue Incinerator Debt

The Harrisburg, Pa., city council passed a resolution on Tuesday night authorizing a Chapter 9 bankruptcy filing, a city official said on Wednesday.

The Pennsylvania state capital faces a $300 million debt crises tied to a project to revamp its incinerator and has been plagued with cash flow problems.

Mark Schwartz, the council's attorney in this matter, said on Wednesday that the bankruptcy filing would give the city "bargaining power" with its creditors and with the state, which is considering a takeover plan.
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"They were tired of being humiliated and denigrated," he said of the council members who voted for bankruptcy on Tuesday.

Chapter 9 is "a much better forum if you really want to address the financial problems of the city," he added.

The bankruptcy court for the middle district of Pennsylvania confirmed on Wednesday they have received a faxed bankruptcy petition from Harrisburg, but that it has not been filed yet.

The state legislature is considering a bill that would call for an eventual takeover of the city and the forced implementation of a fiscal rescue plan.

In July, the City Council rejected a state-approved rescue plan, which called on it to renegotiate labor deals, cut jobs, and sell or lease its most valuable assets, including the incinerator and parking garages.

In August, the council rejected a similar plan that had been crafted by Mayor Linda Thompson, saying that both plans were overly burdensome for Harrisburg residents and did not ask enough of the county, bondholders and the bond insurer, Assured Guaranty.

On Wednesday, a spokesman for Thompson said that the council's actions could accelerate the state approving a takeover of Harrisburg.

"(The bankruptcy) is hugely unpopular, but the council...is an independent body," said mayoral spokesman Robert Philbin.

He also said the city's solicitor had raised questions about the legality of the vote during the meeting on Tuesday. The solicitor, Jason Hess, was not immediately available for comment.

However, City Controller Dan Miller said on Wednesday the filing was the right move for Harrisburg.

"I think it's the only real option that we had," said Miler, adding that the previous plans rejected by city council would have benefited creditors at the expense of the city.

"They wanted to sell all of our assets and make Harrisburg destitute for decades to come," he said.

The Harrisburg, Pa., city council passed a resolution on Tuesday night authorizing a Chapter 9 bankruptcy filing, a city official said on Wednesday.
The Pennsylvania state capital faces a $300 million debt crises tied to a project to revamp its incinerator and has been...